2020 (1) TMI 1585 - NAPA - GST

Respondent failed to pass on Input Tax Credit benefits to homebuyers, directed for further verification

In the matter of: Sh. Bhanja Kishore Pradhan, Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs, New Delhi Versus M/s HCBS Promoters & Developers Pvt. Ltd.

The Authority found that the Respondent had benefited from Input Tax Credit (ITC) but failed to pass on the benefit to homebuyers as required by Section ... Profiteering - purchase of Flats - it is alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by way commensurate reduction in the price of the flats - contravention of section 171 of CGST Act - HELD THAT:- The Respondent has indeed benefited on account of ITC to the extent of 3.31% of his turnover during the post-GST period, i.e. from July, 2017 to December, 2018 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent since he has not passed on the above benefit to his home buyers. Further he has profiteered to the extent of Rs. 1,42,45,741/-, inclusive of GST @ as applicable, on the base profiteered amount of Rs. 1,29,68,303/-. Further, it is clear to us that the Respondent has realized additional amounts of Rs. 70,728/- from the Applicant No. 1, inclusive of GST. The Respondent has also realized an additional amount of Rs. 1,41,75,013/- (inclusive of GST as applicable) from all other home buyers than the Applicant No. 1. The total amount of profiteering on part of the Respondent works out to be Rs. 1,42,45,741/- (Rs. 1,75,013 + Rs. 70,728/-) and the same is tabulated in Annexure- 19 of the Report of the DGAP dated 02.07.2019 - the DGAP is directed to further verify the amount of ITC benefit claimed to have been passed on to his home buyers by the Respondent as per the provisions of Rule 133 (4) of the above Rules and submit his Report clearly mentioning the verified amount of benefit passed on by the Respondent to his home buyers and the balance amount still to be passed on to each of the home buyers. Issues Involved:1. Alleged profiteering by not passing on the benefit of Input Tax Credit (ITC) to homebuyers.2. Compliance with the provisions of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017.3. Determination of the quantum of ITC benefit not passed on.4. Verification of the Respondent's claim of passing on the ITC benefit.Issue-wise Detailed Analysis:1. Alleged Profiteering by Not Passing on the Benefit of ITC to Homebuyers:The Applicant No. 1 alleged that the Respondent did not pass on the benefit of ITC availed by him through a commensurate reduction in the price of flats in the 'Sports Ville' project. The DGAP investigated the complaint and found that the Respondent had indeed availed ITC but had not reduced the basic prices of the flats accordingly, thus contravening Section 171 of the CGST Act, 2017.2. Compliance with the Provisions of Section 171 of the CGST Act, 2017:The DGAP's investigation revealed that the ITC as a percentage of the total turnover available to the Respondent during the pre-GST period was 2.34%, and during the post-GST period, it was 5.65%. This indicated that the Respondent benefited from additional ITC to the tune of 3.31% of the turnover. The Respondent was required to pass on this benefit to the homebuyers by reducing the base price of the flats, which he failed to do.3. Determination of the Quantum of ITC Benefit Not Passed On:The DGAP quantified the amount of benefit of ITC not passed on by the Respondent as Rs. 1,42,45,741/-, which included GST on the base profiteered amount of Rs. 1,29,68,303/-. The DGAP provided a detailed breakdown of the amounts collected from the Applicant No. 1 and other homebuyers, highlighting the profiteered amount. The Respondent had realized an additional amount of Rs. 70,728/- from the Applicant No. 1 and Rs. 1,41,75,013/- from other homebuyers.4. Verification of the Respondent's Claim of Passing on the ITC Benefit:The Respondent claimed to have passed on the benefit of Rs. 1,42,56,347/- to the homebuyers. However, this claim was not verified by the DGAP. The Respondent submitted various documents, including customer-wise ledgers and letters sent to homebuyers, to support his claim. The Authority directed the DGAP to further verify the amount of ITC benefit claimed to have been passed on by the Respondent and submit a report clearly mentioning the verified amount and the balance amount still to be passed on to each homebuyer.Conclusion:The Authority concluded that the Respondent had indeed benefited from ITC to the extent of 3.31% of his turnover during the post-GST period and had not passed on this benefit to the homebuyers, thereby contravening Section 171 of the CGST Act, 2017. The total amount of profiteering was determined to be Rs. 1,42,45,741/-. The DGAP was directed to verify the Respondent's claim of passing on the ITC benefit and submit a detailed report.